Doc. #78277 - Template 73834
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made and entered into as of the 15th day of
May, 2001 (the "Effective Date"), by and between Cinergy and J. Xxxxxx Xxxx, Xx.
(the "Executive"). The capitalized words and terms used throughout this
Agreement are defined in Section 11.
Recitals
The Executive is qualified and available to assume responsibility for
and hold the position of President, CG & E and President, Cinergy Foundation,
Inc., & VP, Corporate Communications. Cinergy desires to secure the employment
of the Executive in accordance with this Agreement.
The Executive is willing to enter and continue to remain in the employ
of Cinergy, on the terms and conditions set forth in this Agreement.
Agreement
In consideration of the mutual premises, covenants and agreements set
forth below, the parties agree as follows:
1. Employment and Term
a. Cinergy agrees to employ the Executive, and the Executive
agrees to enter and remain in the employ of Cinergy, in
accordance with the terms and provisions of this Agreement,
for the Employment Period set forth in Subsection b. The
parties agree that the Company will be responsible for
carrying out all of the premises, covenants, and agreements of
Cinergy set forth in this Agreement.
b. The Employment Period of this Agreement will commence as of
the Effective Date and continue until December 31, 2003;
provided that, commencing on December 31, 2001, and on each
subsequent December 31, the Employment Period will be extended
for one (1) additional year unless either party gives the
other party written notice not to extend this Agreement at
least ninety (90) days before the extension would otherwise
become effective.
2. Duties and Powers of Executive
a. Position. The Executive will serve Cinergy as President, CG &E
and President, Cinergy Foundation, Inc. & VP -------- Corporate
Communications, and he will have such responsibilities, duties,
and authority as are customary for someone of that position and
such additional duties, consistent with his position, as may be
assigned to him from time to time during the Employment Period by
the Board of Directors, the
Chief Executive Officer, or the senior executive officer to whom
he directly reports. Executive shall devote substantially all of
Executive's business time, efforts and attention to the
performance of Executive's duties under this Agreement; provided,
however, that this requirement shall not preclude Executive from
reasonable participation in civic, charitable or professional
activities or the management of Executive's passive investments,
so long as such activities do not materially interfere with the
performance of Executive's duties under this Agreement.
b. Place of Performance. In connection with the Executive's
employment, the Executive will be based at the principal
executive offices of Cinergy, 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxx. Except for required business travel to an extent
substantially consistent with the present business travel
obligations of Cinergy executives who have positions of authority
comparable to that of the Executive, the Executive will not be
required to relocate to a new principal place of business that is
more than thirty (30) miles from Cinergy's principal executive
offices.
3. Compensation. The Executive will receive the following compensation for his
services under this Agreement.
a. Salary. The Executive's Annual Base Salary, payable in pro-rata
installments not less often than semi-monthly, will be at the
annual rate of not less than $294,000 (subject to
across-the-board salary reductions described below). Any increase
in the Annual Base Salary will not serve to limit or reduce any
other obligation of Cinergy under this Agreement. The Annual Base
Salary will not be reduced except for across-the-board salary
reductions similarly affecting all Cinergy management personnel.
If Annual Base Salary is increased or reduced during the
Employment Period, then such adjusted salary will thereafter be
the Annual Base Salary for all purposes under this Agreement.
b. Retirement, Incentive, Welfare Benefit Plans and Other Benefits.
During the Employment Period, the Executive will
be eligible, and Cinergy will take all necessary action to cause
the Executive to become eligible, to participate in all
short-term and long-term incentive, stock option, restricted
stock, performance unit, savings, retirement and welfare plans,
practices, policies and programs applicable generally to other
senior executives of Cinergy who are considered Tier III
executives for compensation purposes, except with respect to any
plan, practice, policy or program to which the Executive has
waived his rights in writing. Executive will participate in the
senior executive supplement portion of the Supplemental Executive
Retirement Plan, and for purposes of that plan, the Executive's
service as an officer of
PSI Energy, Inc. will be treated as combined with his service as
an officer of Cinergy.
Upon his retirement on or after having attained age fifty (50),
the Executive will be eligible for comprehensive medical and
dental benefits which are not materially different from the
benefits provided under the Retirees' Medical Plan and the
Retirees' Dental Plan. The Executive, however, will receive the
maximum level of subsidy currently applicable to similarly
situated active Cinergy employees that is provided by Cinergy to
retirees, as of the Effective Date of this Agreement, for
purposes of determining the amount of monthly premiums due from
the Executive.
The Executive will be a participant in the Annual Incentive Plan,
and the Executive will be paid pursuant to the terms and
conditions of that plan an annual benefit of up to fifty-two and
one-half percent (52.5%) of the Executive's Annual Base Salary
(the "Maximum Annual Bonus"), with a target of no less than
thirty percent (30%) of the Executive's Annual Base Salary (the
"Target Annual Bonus").
The Executive will be a participant in the Long-Term Incentive
Plan (the "LTIP"), and the Executive's annualized target award
opportunity under the LTIP will be equal to no less than
seventy-five percent (75%) of his Annual Base Salary (the "Target
LTIP Bonus").
c. Fringe Benefits and Perquisites. During the Employment Period,
the Executive will be entitled to the following additional fringe
benefits in accordance with the terms and conditions of Cinergy's
policies for such fringe benefits:
(i) Cinergy will furnish to the Executive an automobile
appropriate for the Executive's level of position, or, at
Cinergy's discretion, a cash allowance of equivalent value.
Cinergy will also pay all of the related expenses for
gasoline, insurance, maintenance, and repairs, or provide
for such expenses within the cash allowance.
(ii) Cinergy will pay the initiation fee and the annual dues,
assessments, and other membership charges of the Executive
for membership in a country club selected by the Executive.
(iii)Cinergy will provide paid vacation for four (4) weeks per
year (or such longer period for which Executive is otherwise
eligible under Cinergy's policy).
(iv) Cinergy will furnish to the Executive annual financial
planning and tax preparation services.
(v) Cinergy will provide other fringe benefits in accordance
with Cinergy plans, practices, programs, and policies in
effect from time to time, commensurate with his position and
at least comparable to those received by other Cinergy Tier
III executives.
(vi) Cinergy will provide reasonable costs of relocating from the
Cincinnati, Ohio area to a new primary residence in a manner
that is consistent with the terms of the Relocation Program,
following termination of the Executive's employment for any
reason (other than death
d. Expenses. Cinergy agrees to reimburse the Executive for all
expenses, including those for travel and entertainment,
properly incurred by him in the performance of his duties under
this Agreement in accordance with the policies established from
time to time by the Board of Directors.
4. Termination of Employment
a. Death. The Executive's employment will terminate automatically
upon the Executive's death during the Employment Period.
b. By Cinergy for Cause. Cinergy may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Employment Agreement, "Cause" means the following:
(i) The willful and continued failure by the Executive to
substantially perform the Executive's duties with Cinergy
(other than any such failure resulting from the Executive's
incapacity due to physical or mental illness) that, if
curable, has not been cured within 30 days after the Board
of Directors or the Chief Executive Officer has delivered to
the Executive a written demand for substantial performance,
which demand specifically identifies the manner in which the
Executive has not substantially performed his duties. This
event will constitute Cause even if the Executive issues a
Notice of Termination for Good Reason pursuant to Subsection
4d after the Board of Directors or Chief Executive Officer
delivers a written demand for substantial performance.
(ii) The breach by the Executive of the confidentiality
provisions set forth in Section 9.
(iii)The conviction of the Executive for the commission of a
felony, including the entry of a guilty or nolo contendere
plea, or any willful or grossly negligent action or inaction
by the Executive that has a materially adverse effect on
Cinergy. For purposes of this definition of Cause, no act,
or failure to act, on the Executive's part will be deemed
"willful" unless it is done, or omitted to be done, by the
Executive in bad faith and without reasonable belief that
the Executive's act, or failure to act, was in the best
interest of Cinergy.
c. By Cinergy Without Cause. Cinergy may, upon at least 30 days
advance written notice to the Executive, terminate the
Executive's employment during the Employment Period for a reason
other than Cause, but the obligations placed upon Cinergy in
Section 5 will apply.
d. By the Executive for Good Reason. The Executive may terminate his
employment during the Employment Period for Good Reason. For
purposes of this Agreement, "Good Reason" means the following:
(i) A reduction in the Executive's Annual Base Salary, except
for across-the-board salary reductions similarly affecting
all Cinergy management personnel, or a reduction in any
other benefit or payment described in Section 3 of this
Agreement, except for changes to the employee benefits
programs generally affecting Cinergy management personnel,
provided that those changes, in the aggregate, will not
result in a material adverse change with respect to the
benefits to which the Executive was entitled as of the
Effective Date.
(ii) The material reduction without his consent of the
Executive's title, authority, duties, or responsibilities
from those in effect immediately prior to the reduction, or
a material adverse change in the Executive's reporting
responsibilities.
(iii)Any breach by Cinergy of any other material provision of
this Agreement (including but not limited to the place of
performance as specified in Subsection 2b).
(iv) The Executive's disability due to physical or mental illness
or injury that precludes the Executive from performing any
job for which he is qualified and able to perform based upon
his education, training or experience.
(v) A failure by the Company to require any successor entity to
the Company specifically to assume in writing all of the
Company's obligations to the Executive under this Agreement.
For purposes of determining whether Good Reason exists with respect to a
Qualifying Termination occurring on or within 24 months following a Change in
Control, any claim by the Executive that Good Reason exists shall be presumed to
be correct unless the Company establishes to the Board by clear and convincing
evidence that Good Reason does not exist.
e. By the Executive Without Good Reason. The Executive may terminate
his employment without Good Reason upon prior
written notice to the Company.
f. Notice of Termination. Any termination of the Executive's
employment by Cinergy or by the Executive during the Employment
Period (other than a termination due to the Executive's death)
will be communicated by a written Notice of Termination to the
other party to this Agreement in accordance with Subsection 12b.
For purposes of this Agreement, a "Notice of Termination" means a
written notice that specifies the particular provision of this
Agreement relied upon and that sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for
terminating the Executive's employment under the specified
provision. The failure by the Executive or Cinergy to set forth
in the Notice of Termination any fact or circumstance that
contributes to a showing of Good Reason or Cause will not waive
any right of the Executive or Cinergy under this Agreement or
preclude the Executive or Cinergy from asserting that fact or
circumstance in enforcing rights under this Agreement.
5. Obligations of Cinergy Upon Termination.
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a. Certain Terminations
(i) If a Qualifying Termination occurs during the Employment
Period, Cinergy will pay to the Executive a lump sum amount,
in cash, equal to the sum of the following Accrued
Obligations:
(1) the pro-rated portion of the Executive's Annual Base
Salary payable through the Date of Termination, to the
extent not previously paid.
(2) any amount payable to the Executive under the Annual
Incentive Plan in respect of the most recently
completed fiscal year, to the extent not theretofore
paid.
(3) an amount equal to the AIP Benefit for the fiscal year
that includes the Date of Termination multiplied by a
fraction, the numerator of which is the number of days
from the beginning of that fiscal year to and including
the Date of Termination and the denominator of which is
three hundred and sixty-five (365). The AIP Benefit
component of the calculation will be equal to the
annual bonus that would have been earned by the
Executive pursuant to any annual bonus or incentive
plan maintained by Cinergy in respect of the fiscal
year in which occurs the date of determination,
determined by projecting Cinergy's performance and
other applicable goals and objectives for the entire
fiscal year based on Cinergy's performance during the
period of such fiscal year occurring prior to the Date
of Termination, and based on such other assumptions and
rates as Cinergy deems reasonable.
(4) the Accrued Obligations described in this Paragraph
5a(i) will be paid within thirty (30) days after the
Date of Termination. These Accrued Obligations are
payable to the Executive regardless of whether a Change
in Control has occurred.
(ii) In the event of a Qualifying Termination either prior to the
occurrence of a Change in Control, or more than twenty-four
(24) months following the occurrence of a Change in Control,
Cinergy will pay the Accrued Obligations, and Cinergy will
have the following additional obligations:
(1) Cinergy will pay to the Executive a lump sum amount, in
cash; equal to three (3) times the sum of the Annual
Base Salary and the Annual Bonus. For this purpose, the
Annual Base Salary will be at the rate in effect at the
time Notice of Termination is given (without giving
effect to any reduction in Annual Base Salary, if any,
prior to the termination, other than across-the-board
reductions), and the Annual Bonus will be the higher of
(A) the annual bonus earned by the Executive pursuant
to any annual bonus or incentive plan maintained by
Cinergy in respect of the year ending immediately prior
to the fiscal year in which occurs the Date of
Termination, and (B) the annual bonus that would have
been earned by the Executive pursuant to any annual
bonus or incentive plan maintained by Cinergy in
respect of the fiscal year in which occurs the Date of
Termination, calculated by projecting Cinergy's
performance and other applicable goals and objectives
for the entire fiscal year based on Cinergy's
performance during the period of such fiscal year
occurring prior to the Date of Termination, and based
on such other assumptions and rates as Cinergy deems
reasonable; provided, however that for purposes of this
Subsection 5a(ii)(1)(B), the Annual Bonus shall not be
less than the Annual Target Bonus, nor greater than the
Maximum Target Bonus for the year in which the Date of
Termination occurs. This lump sum will be paid within
thirty (30) days of the Date of Termination.
(2) Subject to Clauses (A), (B) and (C) below, Cinergy will
provide, until the end of the Employment Period,
medical and dental benefits to the Executive and/or the
Executive's dependents at least equal to those that
would have been provided if the Executive's employment
had not been terminated (excluding benefits to which
the Executive has waived his rights in writing). The
benefits described in the preceding sentence will be in
accordance with the medical and welfare benefit plans,
practices, programs, or policies of Cinergy (the "M&W
Plans") as then currently in effect and applicable
generally to other Cinergy senior executives and their
families.
(A) If, as of the Executive's Date of Termination, the
Executive meets the eligibility requirements for
Cinergy's retiree medical and welfare benefit plans,
the provision of those retiree medical and welfare
benefit plans to the Executive will satisfy Cinergy's
obligation under this Subparagraph 5a(ii)(2).
(B) If, as of the Executive's Date of Termination, the
provision to the Executive of the M&W Plan benefits
described in this Subparagraph 5a(ii)(2) would either
(1) violate the terms of the M&W Plans (or any related
insurance policies) or (2) violate any of the Code's
nondiscrimination requirements applicable to the M&W
Plans, then Cinergy, in its sole discretion, may elect
to pay the Executive, in lieu of the M&W Plan benefits
described under this Subparagraph 5a(ii)(2), a lump sum
cash payment equal to the total monthly premiums (or in
the case of a self funded plan, the cost of COBRA
continuation coverage) that would have been paid by
Cinergy for the Executive under the M&W Plans from the
Date of Termination through the end of the Employment
Period, grossed up for the effect of federal, state and
local income taxes. Nothing in this Clause will affect
the Executive's right to elect COBRA continuation
coverage under a M&W Plan in accordance with applicable
law, and Cinergy will make the payment described in
this Clause whether or not the Executive elects COBRA
continuation coverage, and whether or not the Executive
receives health coverage from another employer.
(C) If the Executive becomes employed by another employer
and is eligible to receive medical or other welfare
benefits under another employer-provided plan, any
benefits provided to the Executive under the M&W Plans
will be secondary to those provided under the other
employer-provided plan during the Executive's
applicable period of eligibility.
(3) Cinergy will provide tax-counseling services through an
agency selected by the Executive, not to exceed fifteen
thousand dollars ($15,000.00) in cost.
(4) Title and ownership of the automobile assigned to the
Executive by Cinergy will be transferred to the
Executive within thirty (30) days of the Date of
Termination. To the extent there is imputed income to
the Executive resulting from the transfer of title, the
Executive will receive a cash payment equal to the
amount of federal, state and local income taxes
resulting from this transfer as soon as
administratively feasible after the transfer is
effective. At Cinergy's discretion, a cash payment of
an equivalent value of the automobile and corresponding
income taxes may be paid in lieu of the assignment of
the automobile.
(iii)In the event of a Qualifying Termination during the
twenty-four (24) month period beginning upon the occurrence
of a Change in Control, Cinergy will pay the Accrued
Obligations, and Cinergy will also have the following
additional obligations:
(1) Cinergy will pay to the Executive a lump sum severance
payment, in cash, equal to three (3) times the higher
of (x) the sum of the Executive's current Annual Base
Salary and Target Annual Bonus and (y) the sum of the
Executive's Annual Base Salary in effect immediately
prior to the Change in Control and the Change in
Control Bonus. For purposes of this Agreement, the
Change in Control Bonus shall mean the higher of (A)
the annual bonus earned by the Executive pursuant to
any annual bonus or incentive plan maintained by
Cinergy in respect of the year ending immediately prior
to the fiscal year in which occurs the Date of
Termination or, if higher, immediately prior to the
fiscal year in which occurs the Change in Control, and
(B) the annual bonus that would have been earned by the
Executive pursuant to any annual bonus or incentive
plan maintained by Cinergy in respect of the year in
which occurs the Date of Termination, calculated by
projecting Cinergy's performance and other applicable
goals and objective for the entire fiscal year based on
Cinergy's performance during the period of such fiscal
year occurring prior to the Date of Termination, and
based on such other assumptions and rates as Cinergy
deems reasonable, provided, however, that for purposes
of this Subsection 5a(iii)(1)(B), such Change in
Control Annual Bonus shall not be less than the Annual
Target Bonus, nor greater than the Maximum Target
Bonus. This lump sum will be paid within thirty (30)
days of the Date of Termination.
(2) Cinergy will pay to the Executive the lump sum present
value of any benefits under the Executive Supplemental
Life Program under the terms of the applicable plan or
program as of the Date of Termination, calculated as if
the Executive was fully vested as of the Date of
Termination. The lump sum present value, assuming
commencement at age 50 or age as of the Date of
Termination if later, will be determined using the
interest rate applicable to lump sum payments in the
Cinergy Corp. Non-Union Employees' Pension Plan or any
successor to that plan for the plan year that includes
the Date of Termination. To the extent no such interest
rate is provided therein, the annual interest rate
applicable under section 417(e)(3) of the Code, or any
successor provision thereto, for the second full
calendar month preceding the first day of the calendar
year that includes the Date of Termination will be
used. This lump sum will be paid within thirty (30)
days of the Date of Termination.
(3) The Executive shall be fully vested in his accrued
benefits as of the Date of Termination under the
Executive Retirement Plans, and his accrued benefits
thereunder will be calculated as if the Executive was
credited with three (3) additional years of age and
service as of the Date of Termination. However, Cinergy
will not commence payment of such benefits until the
Executive has attained age 50. For purposes of
determining benefits under the Executive Retirement
Plans, the definition of earnings will be the same as
defined in such plans.
(4) For a thirty-six (36) month period after the Date of
Termination, Cinergy will arrange to provide to the
Executive and/or the Executive's dependents life,
disability, accident, and health insurance benefits
substantially similar to those that the Executive
and/or the Executive's dependents are receiving
immediately prior to the Notice of Termination at a
substantially similar cost to the Executive (without
giving effect to any reduction in those benefits
subsequent to a Change in Control that constitutes Good
Reason), except for any benefits that were waived by
the Executive in writing. If Cinergy arranges to
provide the Executive and/or the Executive's dependents
with life, disability, accident, and health insurance
benefits, those benefits will be reduced to the extent
comparable benefits are actually received by or made
available to the Executive and/or the Executive's
dependents during the thirty-six (36) month period
following the Executive's Date of Termination. The
Executive must report to Cinergy any such benefits that
he or his dependents actually receives. In lieu of the
benefits described in the preceding sentences, Cinergy,
in its sole discretion, may elect to pay to the
Executive a lump sum cash payment equal to thirty-six
(36) times the monthly premiums (or in the case of a
self funded plan, the cost of COBRA continuation
coverage) that would have been paid by Cinergy to
provide those benefits to the Executive and/or the
Executive's dependents, grossed up for the effect of
federal, state and local income taxes. Nothing in this
Subparagraph 5a(iii)(4) will affect the Executive's
right to elect COBRA continuation coverage in
accordance with applicable law, and Cinergy will make
the payment described in this Clause whether or not the
Executive elects COBRA continuation coverage, and
whether or not the Executive receives health coverage
from another employer.
(5) Title and ownership of the automobile assigned to the
Executive by Cinergy will be transferred to the
Executive within thirty (30) days of the Date of
Termination. To the extent there is imputed income to
the Executive resulting from the transfer of title, the
Executive will receive a cash payment equal to the
amount of federal, state and local income taxes
resulting from this transfer as soon as
administratively feasible after the transfer is
effective. At Cinergy's discretion, a cash payment of
an equivalent value of the automobile and corresponding
income taxes may be paid in lieu of the assignment of
the automobile.
(6) Cinergy will provide tax counseling services through an
agency selected by the Executive, not to exceed fifteen
thousand dollars ($15,000.00) in cost.
(7) Cinergy will provide annual dues and assessments of the
Executive for membership in a country club selected by
the Executive until the end of the Employment Period.
(8) Cinergy will provide outplacement services suitable to
the Executive's position until the end of the
Employment Period or, if earlier, until the first
acceptance by the Executive of an offer of employment.
At the Executive's discretion, 15% of Annual Base
Salary may be paid in lieu of outplacement services.
For purposes of this Paragraph 5a(iii), the Executive will be deemed to
have incurred a Qualifying Termination upon a Change in Control if the
Executive's employment is terminated prior to a Change in Control, without Cause
at the direction of a Person who has entered into an agreement with Cinergy, the
consummation of which will constitute a Change in Control, or if the Executive
terminates his employment for Good Reason prior to a Change in Control if the
circumstances or event that constitutes Good Reason occurs at the direction of
such a Person.
b. Termination by Cinergy for Cause or by the Executive Other Than
for Good Reason. Subject to the provisions of Section 7, and
notwithstanding any other provisions of this Agreement, if the
Executive's employment is terminated for Cause during the
Employment Period, or if the Executive terminates employment
during the Employment Period other than a termination for Good
Reason, Cinergy will have no further obligations to the Executive
under this Agreement other than the obligation to pay to the
Executive the Accrued Obligations, plus any other earned but
unpaid compensation, in each case to the extent not previously
paid.
c. Certain Tax Consequences.
(i) In the event that any Severance Benefits paid or payable to
the Executive or for his benefit pursuant to the terms of
this Agreement or otherwise in connection with, or arising
out of, his employment with Cinergy or a change in ownership
or effective control of Cinergy or of a substantial portion
of its assets (a "Payment" or "Payments") would be subject
to any Excise Tax, then the Executive will be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes
(including any interest, penalties, additional tax, or
similar items imposed with respect thereto and the Excise
Tax), including any Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon or assessable
against the Executive due to the Payments.
(ii) Subject to the provisions of Section 5(iii), all
determinations required to be made under this Section 5c,
including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be
made by the Accounting Firm, which shall provide detailed
supporting calculations both to the Company and the
Executive within fifteen (15) business days of the receipt
of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. All
fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 5c, shall be paid by Cinergy to the
Executive within five (5) days of the receipt of the
Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon Cinergy and the
Executive. However, as a result of the uncertainty in the
application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it
is possible that Gross-Up Payments which will not have been
made by Cinergy should have been made ("Underpayment"),
consistent with the calculations required to be made
hereunder. In the event that Cinergy exhausts its remedies
pursuant to Section 5c(iii) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting
Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by
Cinergy to or for the benefit of the Executive. In the event
that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of
termination of the Executive's employment, the Executive
shall repay to the Company, at the time that the amount of
such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local
income and employment tax imposed on the Gross-Up Payment
being repaid by the Executive to the extent that such
repayment results in a reduction in Excise Tax and/or a
federal, state or local income or employment tax deduction)
plus interest on the amount of such repayment at the rate
provided in Code section 1274(b)(2)(B).
(iii)The value of any non-cash benefits or any deferred payment
or benefit paid or payable to the Executive will be
determined in accordance with the principles of Code
sections 280G(d)(3) and (4). For purposes of determining the
amount of the Gross-Up Payment, the Executive will be deemed
to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and applicable state and
local income taxes at the highest marginal rate of taxation
in the state and locality of the Executive's residence on
the Date of Termination, net of the maximum reduction in
federal income taxes that would be obtained from deduction
of those state and local taxes.
(iv) Notwithstanding anything contained in this Agreement to the
contrary, in the event that, according to the Accounting
Firm's determination, an Excise Tax will be imposed on any
Payment or Payments, Cinergy will pay to the applicable
government taxing authorities as Excise Tax withholding, the
amount of the Excise Tax that Cinergy has actually withheld
from the Payment or Payments in accordance with law.
d. Value Creation Plan and Stock Options. Upon the Executive's
termination of employment for any reason, the Executive's
entitlement to restricted shares and performance shares under the
Value Creation Plan and any stock options granted under the Stock
Option Plan or the LTIP will be determined under the terms of the
appropriate plan and any applicable administrative guidelines and
written agreements.
e. Deferred Compensation Plan and 401(k) Excess Plan. Upon the
Executive's termination of employment for any reason, the
Executive's entitlements, if any, under the Non-Qualified
Deferred Compensation Plan and 401(k) Excess Plan shall be
distributed under the terms of such plans and any applicable
administrative guidelines and written agreements.
f. Other Fees and Expenses. Cinergy will also reimburse the
Executive for all reasonable legal fees and expenses incurred by
the Executive in successfully disputing a Qualifying Termination
that entitles the Executive to Severance Benefits. Payment will
be made within five (5) business days after delivery of the
Executive's written request for payment accompanied by such
evidence of fees and expenses incurred as Cinergy reasonably may
require.
6. Non-Exclusivity of Rights. Nothing in this Agreement will prevent or limit
the Executive's continuing or future participation in any benefit, plan,
program, policy, or practice provided by Cinergy and for which the
Executive may qualify, except with respect to any benefit to which the
Executive has waived his rights in writing or any plan, program, policy, or
practice that expressly excludes the Executive from participation. In
addition, nothing in this Agreement will limit or otherwise affect the
rights the Executive may have under any other contract or agreement with
Cinergy entered into after the Effective Date. Amounts that are vested
benefits or that the Executive is otherwise entitled to receive under any
benefit, plan, program, policy, or practice of, or any contract or
agreement entered into after the Effective Date with Cinergy, at or
subsequent to the Date of Termination, will be payable in accordance with
that benefit, plan, program, policy or practice, or that contract or
agreement, except as explicitly modified by this Agreement.
7. Full Settlement: Mitigation. Cinergy's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
under this Agreement will not be affected by any set-off, counterclaim,
recoupment, defense, or other claim, right, or action that Cinergy may have
against the Executive or others. In no event will the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts (including amounts for damages for breach)
payable to the Executive under any of the provisions of this Agreement and,
except as provided in Subparagraphs 5a(ii)(2) and 5a(iii)(4), those amounts
will not be reduced simply because the Executive obtains other employment.
If the Executive finally prevails on the substantial claims brought with
respect to any dispute between Cinergy and the Executive as to the
interpretation, terms, validity, or enforceability of (including any
dispute about the amount of any payment pursuant to) this Agreement,
Cinergy agrees to pay all reasonable legal fees and expenses that the
Executive may reasonably incur as a result of that dispute.
8. Arbitration. The parties agree that any dispute, claim, or controversy
based on common law, equity, or any federal, state, or local statute,
ordinance, or regulation (other than workers' compensation claims) arising
out of or relating in any way to the Executive's employment, the terms,
benefits, and conditions of employment, or concerning this Agreement or its
termination and any resulting termination of employment, including whether
such a dispute is arbitrable, shall be settled by arbitration. This
agreement to arbitrate includes but is not limited to all claims for any
form of illegal discrimination, improper or unfair treatment or dismissal,
and all tort claims. The Executive will still have a right to file a
discrimination charge with a federal or state agency, but the final
resolution of any discrimination claim will be submitted to arbitration
instead of a court or jury. The arbitration proceeding will be conducted
under the employment dispute resolution arbitration rules of the American
Arbitration Association in effect at the time a demand for arbitration
under the rules is made. The decision of the arbitrator(s), including
determination of the amount of any damages suffered, will be exclusive,
final, and binding on all parties, their heirs, executors, administrators,
successors and assigns. Each party will bear its own expenses in the
arbitration for arbitrators' fees and attorneys' fees, for its witnesses,
and for other expenses of presenting its case. Other arbitration costs,
including administrative fees and fees for records or transcripts, will be
borne equally by the parties. Notwithstanding anything in this Section to
the contrary, if the Executive prevails with respect to any dispute
submitted to arbitration under this Section, Cinergy will reimburse or pay
all legal fees and expenses that the Executive may reasonably incur as a
result of the dispute as required by Section 7.
9. Confidential Information. The Executive will hold in a fiduciary capacity
for the benefit of Cinergy, as well as all of Cinergy's successors and
assigns, all secret, confidential information, knowledge, or data relating
to Cinergy, and its affiliated businesses, that the Executive obtains
during the Executive's employment by Cinergy or any of its affiliated
companies, and that has not been or subsequently becomes public knowledge
(other than by acts by the Executive or representatives of the Executive in
violation of this Agreement). During the Employment Period and thereafter,
the Executive will not, without Cinergy's prior written consent or as may
otherwise by required by law or legal process, communicate or divulge any
such information, knowledge, or data to anyone other than Cinergy and those
designated by it. The Executive understands that during the Employment
Period, Cinergy may be required from time to time to make public disclosure
of the terms or existence of the Executive's employment relationship to
comply with various laws and legal requirements. In addition to all other
remedies available to Cinergy in law and equity, this Agreement is subject
to termination by Cinergy for Cause under Section 4b in the event the
Executive violates any provision of this Section.
10. Successors.
a. This Agreement is personal to the Executive and, without
Cinergy's prior written consent, cannot be assigned by the
Executive other than Executive's designation of a beneficiary of
any amounts payable hereunder after the Executive's death. This
Agreement will inure to the benefit of and be enforceable by the
Executive's legal representatives.
b. This Agreement will inure to the benefit of and be binding upon
Cinergy and its successors and assigns.
c. Cinergy will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Cinergy to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that Cinergy would be required to
perform it if no succession had taken place. Cinergy's failure to
obtain such an assumption and agreement prior to the effective
date of a succession will be a breach of this Agreement and will
entitle the Executive to compensation from Cinergy in the same
amount and on the same terms as if the Executive were to
terminate his employment for Good Reason upon a Change in
Control, except that, for purposes of implementing the foregoing,
the date on which any such succession becomes effective will be
deemed the Date of Termination.
11. Definitions. As used in this Agreement, the following terms, when
capitalized, will have the following meanings:
a. Accounting Firm. "Accounting Firm" means Cinergy's independent
auditors.
b. Accrued Obligations. "Accrued Obligations" means the accrued
obligations described in Paragraph 5a(i).
c. Agreement. "Agreement" means this Employment Agreement between
Cinergy and the Executive.
d. AIP Benefit. "AIP Benefit" means the Annual Incentive Plan
benefit described in Subsection 5a(i).
e. Annual Base Salary. "Annual Base Salary" means the annual base
salary payable to the Executive pursuant to Subsection 3a.
f. Annual Bonus. "Annual Bonus" has the meaning set forth in
Subsection 5a(ii)(1).
g. Annual Incentive Plan. "Annual Incentive Plan" means the Cinergy
Corp. Annual Incentive Plan or any similar plan or
successor to the Annual Incentive Plan.
h. Board of Directors. "Board of Directors" means the board of
directors of the Company.
i. COBRA. "COBRA" means the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
j. Cause. "Cause" has the meaning set forth in Subsection 4b.
k. Change in Control. "A Change in Control" will be deemed to have
occurred if any of the following events occur, after the
Effective Date:
(i) Any "person" or "group" (within the meaning of subsection
13(d) and paragraph 14(d)(2) of the 0000 Xxx) is or becomes
the beneficial owner (as defined in Rule l3d-3 under the
1934 Act), directly or indirectly, of securities of the
Company (not including in the securities beneficially owned
by such a Person any securities acquired directly from the
Company or its affiliates) representing more than twenty
percent (20%) of the combined voting power of the Company's
then outstanding securities, excluding any person who
becomes such a beneficial owner in connection with a
transaction described in Clause (1) of Paragraph (ii) below;
or
(ii) There is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company
with any other corporation, other than (1) a merger or
consolidation that would result in the voting securities of
the Company outstanding immediately prior to that merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity or its parent) at least sixty percent
(60%) of the combined voting power of the securities of the
Company or the surviving entity or its parent outstanding
immediately after the merger or consolidation, or (2) a
merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no person is or becomes the beneficial owner, directly
or indirectly, of securities of the Company (not including
in the securities beneficially owned by such a Person any
securities acquired directly from the Company or its
affiliates other than in connection with the acquisition by
the Company or its affiliates of a business) representing
twenty percent (20%) or more of the combined voting power of
the Company's then outstanding securities; or
(iii)During any period of two (2) consecutive years, individuals
who at the beginning of that period constitute the Board of
Directors and any new director (other than a director whose
initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to
a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by
the Company's shareholders was approved or recommended by a
vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning
of that period or whose appointment, election, or nomination
for election was previously so approved or recommended cease
for any reason to constitute a majority of the Board of
Directors; or
(iv) The shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets,
other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at
least sixty percent (60%) of the combined voting power of
the voting securities of which are owned by shareholders of
the Company in substantially the same proportions as their
ownership of the Company immediately prior to the sale.
l. Change in Control Bonus. "Change in Control Bonus" has the
meaning set forth in Subsection 5a(iii)(1).
m. Chief Executive Officer. "Chief Executive Officer" means the
chief executive officer of the Company.
n. Cinergy. "Cinergy" means the Company, its subsidiaries, and/or
its affiliates, and any successors to the foregoing.
o. Code. "Code" means the Internal Revenue Code of 1986, as amended,
and interpretive rules and regulations.
p. Company. "Company" means Cinergy Corp.
q. Date of Termination. "Date of Termination" means:
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive with Good Reason, the date of
receipt of the Notice of Termination or any later date
specified in the notice, as the case may be;
(ii) if the Executive's employment is terminated by the Executive
without Good Reason, thirty (30) days after the date on
which the Executive notifies the Company of the termination;
(iii)if the Executive's employment is terminated by the Company
other than for Cause, thirty (30) days after the date on
which the Company notifies the Executive of the termination;
and
(iv) if the Executive's employment is terminated by reason of
death, the date of death.
r. Deferred Compensation Plan. "Deferred Compensation Plan" means
the Cinergy Corp. Non-Qualified Deferred Incentive
Compensation Plan or any similar plan or successor to that plan..
s. Effective Date. "Effective Date" means May 15, 2001.
t. Employment Period. "Employment Period" has the meaning set forth
in Subsection 1b.
u. Excise Tax. "Excise Tax" means any excise tax imposed by Code
section 4999, together with any interest, penalties, additional
tax or similar items that are incurred by the Executive
with respect to the excise tax imposed by Code section 4999.
v. Executive. "Executive" means J. Xxxxxx Xxxx, Xx.
w. Executive Retirement Plans. "Executive Retirement Plans" means
the Cinergy Corp. Non-Union Employees' Pension Plan, the Cinergy
Corp. Supplemental Executive Retirement Plan and the Cinergy
Corp. Excess Pension Plan or any similar plans or successors to
those plans.
x. Executive Supplemental Life Program. "Executive Supplemental Life
Program" means the Cinergy Corp. Executive Supplemental Life
Insurance Program or any similar program or successor to the
Executive Supplemental Life Program.
y. 401(k) Excess Plan. "401(k) Excess Plan" means the Cinergy Corp.
401(k) Excess Plan, or any similar plan or successor to that
plan.
z. Good Reason. "Good Reason" has the meaning set forth in
Subsection 4d.
aa. Gross-Up Payment. "Gross-Up Payment" has the meaning set forth in
Subsection 5c.
bb. Long-Term Incentive Plan or LTIP. "Long-Term Incentive Plan" or
"LTIP" means the long-term incentive plan implemented under the
Cinergy Corp. 1996 Long-Term Incentive Compensation Plan or any
successor to that plan.
cc. M&W Plans. "M&W Plans" has the meaning set forth in Subparagraph
5a(ii)(3).
dd. Maximum Annual Bonus. "Maximum Annual Bonus" has the meaning set
forth in Subsection 3b.
ee. Notice of Termination. "Notice of Termination" has the meaning
set forth in Subsection 4f.
ff. Payment or Payments. "Payment" or "Payments" has the meaning set
forth in Subsection 5c.
gg. Person. "Person" has the meaning set forth in paragraph 3(a)(9)
of the 1934 Act, as modified and used in subsections 13(d) and
14(d) of the 1934 Act; however, a Person will not include the
following:
(i) Cinergy or any of its subsidiaries;
(ii) A trustee or other fiduciary holding securities under an
employee benefit plan of Cinergy or its subsidiaries;
(iii)An underwriter temporarily holding securities pursuant to
an offering of those securities; or
(iv) A corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
hh. Qualifying Termination. "Qualifying Termination" means (i) the
termination by the Company of the Executive's employment with
Cinergy other than a termination for Cause or (ii) the
termination by the Executive of the Executive's employment with
Cinergy for Good Reason.
ii. Relocation Program. "Relocation Program" means the Cinergy Corp.
Relocation Program, or any similar program or successor to that
program, as in effect on the date of the Executive's termination
of employment.
jj. Retirees' Dental Plan. "Retirees' Dental Plan" means the Cinergy
Corp. Retirees' Dental program or any similar program or
successor to that program.
kk. Retirees' Medical Plan. "Retirees' Medical Plan" means the
Cinergy Corp. Retirees' Medical program or any similar
program or successor to that program.
ll. Severance Benefits. "Severance Benefits" means the payments and
benefits payable to the Executive pursuant to Section 5.
mm. Stock Related Documents. "Stock Related Documents" means the
LTIP, the Cinergy Corp. Stock Option Plan, and the Value Creation
Plan and any applicable administrative guidelines and written
agreements relating to those plans.
nn. Target Annual Bonus. "Target Annual Bonus" has the meaning set
forth in Subsection 3b.
oo. Target LTIP Bonus. "Target LTIP Bonus" has the meaning set forth
in Subsection 3b.
pp. Value Creation Plan. "Value Creation Plan" means the Value
Creation Plan or any similar plan, or successor plan of the LTIP.
12. Miscellaneous.
a. This Agreement will be governed by and construed in accordance
with the laws of the State of Ohio, without reference to
principles of conflict of laws. The captions of this Agreement
are not part of its provisions and will have no force or effect.
This Agreement may not be amended, modified, repealed, waived,
extended, or discharged except by an agreement in writing signed
by the party against whom enforcement of the amendment,
modification, repeal, waiver, extension, or discharge is sought.
Only the Chief Executive Officer or his designee will have
authority on behalf of Cinergy to agree to amend, modify, repeal,
waive, extend, or discharge any provision of this Agreement.
b. All notices and other communications under this Agreement will be
in writing and will be given by hand delivery to the other party
or by Federal Express or other comparable national or
international overnight delivery service, addressed as follows:
If to the Executive:
-------------------
J. Xxxxxx Xxxx, Xx.
Cinergy Corp.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
If to Cinergy:
-------------
Cinergy Corp.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000-0000
Attn: Chief Executive Officer
or to such other address as either party has furnished to the
other in writing in accordance with this Agreement. All
notices and communications will be effective when actually
received by the addressee.
c. The invalidity or unenforceability of any provision of this
Agreement will not affect the validity or enforceability of any
other provision of this Agreement.
d. Cinergy may withhold from any amounts payable under this
Agreement such federal, state, or local taxes as are required to
be withheld pursuant to any applicable law or regulation.
e. The Executive's or Cinergy's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or Cinergy may have under this
Agreement, including without limitation the right of the
Executive to terminate employment for Good Reason pursuant to
Subsection 4d or the right of Cinergy to terminate the
Executive's employment for Cause pursuant to Subsection 4b, will
not be deemed to be a waiver of that provision or right or any
other provision or right of this Agreement.
f. References in this Agreement to the masculine include the
feminine unless the context clearly indicates otherwise.
g. This instrument contains the entire agreement of the Executive
and Cinergy with respect to the subject matter of this Agreement;
and subject to any agreements evidencing stock option or
restricted stock grants described in Subsection 3b and the Stock
Related Documents, all promises, representations, understandings,
arrangements, and prior agreements are merged into this Agreement
and accordingly superseded.
h. This Agreement may be executed in counterparts, each of which
will be deemed to be an original but all of which together will
constitute one and the same instrument.
i. Cinergy and the Executive agree that Cinergy Services, Inc. will
be authorized to act for Cinergy with respect to all aspects
pertaining to the administration and interpretation of this
Agreement.
IN WITNESS WHEREOF, the Executive and the Company have caused this
Agreement to be executed as of the Effective Date.
CINERGY SERVICES, INC.
By:_____________________________
Xxxxx X. Xxxxxx
Chairman and
Chief Executive Officer
EXECUTIVE
--------------------------------
J. Xxxxxx Xxxx, Xx.
